G.R. No.

81559-60 April 6, 1992

PEOPLE OF THE PHILIPPINES, (public petitioner) and ALLIED BANKING

CORPORATION (private petitioner),
vs.
HON. JUDGE DAVID G. NITAFAN (public respondent) and BETTY SIA ANG (private
respondent).

FACTS : Petitioner Allied banking Corporation (ABC) charged private respondent, Betty Sia
Ang, for estafa for willfully, unlawfully and feloniously defraud ABC. Private respondent
received a trust from ABC amounting to P398,000.00 covered by a domestic letter of credit,
under the express obligation to sell the same and account for the proceeds of the sale, if
sold, or to return the merchandise , if not sold. Upon demand, private respondent paid only
P283,115.78.

Betty Sia Ang filed a motion to quash the information on the grounds that the facts charged
do not constitute an offense. Respondent judge granted the motion to quash.

ISSUE : Whether or not an entrustee in a trust receipt agreement who fails to deliver the
proceeds of the sale or to return the goods if not sold to the entruster-bank is liable for the
crime of estafa?

RULINGS : The factual circumstances in the present case show that the alleged violation
was committed sometime in 1980 or during the effectivity of P.D. 115. The failure, therefore,
to account for the P114,884.22 balance is what makes the accused-respondent criminally
liable for estafa.

A trust receipt arrangement does not involve a simple loan transaction between a creditor
and debtor-importer. Apart from a loan feature, the trust receipt arrangement has a security
feature that is covered by the trust receipt itself. (Vintola v. Insular Bank of Asia and America,
151 SCRA 578 [1987]) That second feature is what provides the much needed financial
assistance to our traders in the importation or purchase of goods or merchandise through the
use of those goods or merchandise as collateral for the advancements made by a bank.
(Samo v. People, supra). The title of the bank to the security is the one sought to be
protected and not the loan which is a separate and distinct agreement.

The Trust Receipts Law punishes the dishonesty and abuse of confidence in the
handling of money or goods to the prejudice of another regardless of whether the
latter is the owner or not. The law does not seek to enforce payment of the loan. Thus,
there can be no violation of a right against imprisonment for non-payment of a debt.

Trust receipts are indispensable contracts in international and domestic business

transactions. The prevalent use of trust receipts, the danger of their misuse and/or
misappropriation of the goods or proceeds realized from the sale of goods, documents or
instruments held in trust for entruster-banks, and the need for regulation of trust receipt
transactions to safeguard the rights and enforce the obligations of the parties involved are
the main thrusts of P.D. 115. As correctly observed by the Solicitor General, P.D. 115, like
Batas Pambansa Blg. 22, punishes the act "not as an offense against property, but as an
offense against public order. . . ." The misuse of trust receipts therefore should be deterred
to prevent any possible havoc in trade circles and the banking community (citing Lozano v.
Martinez, 146 SCRA 323 [1986]; Rollo, p. 57) It is in the context of upholding public interest
that the law now specifically designates a breach of a trust receipt agreement to be an act
that "shall" make one liable for estafa.

G.R. No. L-59640 July 15, 1991

DAMIAN ROBLES, petitioner,

vs.
THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

FACTS : Petitioner, Damian Robles, was charged with the crime of estafa. Petitioner,
received in trust from Roberto Ng y Shiang an office equipments amounting to P14,895.00
for selling the same. Under the express obligation of turning over the proceeds of the sale, if
sold, or of returning the said office equipments if not sold. Despite repeated demands, he
refuses to remit the proceeds of the sale or return the office equipments. The trial court
convicted petitioner for the crime charged.

Petitioner appealed the decision to the Court of Appeals. CA affirmed the decision of the trial
court but modified the penalty.

ISSUE : Whether or not petitioner is guilty of estafa?

RULINGS : We note that under Section 13 of the Trust Receipts Law, the violation by an
entrustee of his obligations under a trust receipt document, more specifically his failure to
turnover the proceeds of the sale of the goods covered by the trust receipt, or to return said
goods as they were not sold or disposed of, would constitute the crime of estafa under Article
315 (1) (b), Revised Penal Code.

It is also pertinent to point out that quite apart from and even in the absence of the provisions
of Section 13 of the Trust Receipt Law, the failure of Damian Robles to comply with his
fiduciary obligation under the delivery trust receipts here involved, constituted the offense of
estafa punishable under Article 315 (1) (b) of the Revised Penal Code. In other words, the
elements of the offense of estafa set out in Article 315 (1) (b) are present in the instant case.
Those elements are: (1) "unfaithfulness or abuse of confidence;" (2) "misappropriating . . .
money or goods . . .; (3) received by the offender in trust or on commission . . . or under any
other obligation involving the duty to make delivery of or to return the same . . .;" and (4) "to
the prejudice of another." The delivery trust receipts, in the case at bar, admittedly signed by
petitioner Damian Robles imposed on him the duty to return the article or the proceeds
thereof to Paramount within two (2) days from the specified dates of the trust receipts. The
failure to account, upon demand, for funds or property held in trust is evidence of
misappropriation which, not having been explained away or rebutted by petitioner Damian
Robles, warranted his conviction for estafa under the Revised Penal Code. This was settled
doctrine long before the promulgation of the Trust Receipts Law.

We note in this connection that the delivery trust receipts here involved in fact constituted
trust receipts within the meaning of Presidential Decree No. 115, known as the "Trust
Receipts Law," which took effect on 29 January 1973. Section 4 thereof defines a "trust
receipt" and a "trust receipt transaction" for purposes of the decree in the following terms:
 Sec. 4. What constitutes a trust receipt transaction. — A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in
this Decree as the entruster, and another person referred to in this Decree as the
entrustee, whereby the entruster, who owns or holds absolute title or security interests
over certain specified goods documents or instruments, releases the same to the
possession of the entrustee upon the latter's execution and delivery to the entruster of a
signed document called a "trust receipt" wherein the entrustee binds himself to hold the
designated goods, documents or instruments in trust for the entruster and to sell or
otherwise dispose of the goods, documents or instruments with the obligation to turn
over to the entruster the proceeds thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the goods, documents or instruments
themselves if they are unsold or not otherwise disposed of, in accordance with the terms
and conditions specified in the trust receipt, . . . .

G.R. No. 130365. July 14, 2000

STATE INVESTMENT HOUSE, INCORPORATED, petitioner, vs. COURT OF APPEALS,

PHILIPPINE NATIONAL BANK and SPOUSES FEDERICO L. FRANCO and FELICISIMA
R. FRANCO, respondents.

FACTS : Private respondent filed an interpleader to the trial court to determine to whom they
should continue paying the amounts in the promissory note whom they issued to Delta Motor
Corporation (DMC), from whom they purchased a four units of M.A.N. Diesel Long Distance
Touring Coaches. The State Investment House, Inc. (SIHI) claimed that they are entitled to
the promissory note because DMC executed in favor of SIHI a deed of sale of various
account receivable including the subject promissory note to settle his loan to SIHI.

While PNB, on the other hand, claimed over the promissory note is based on letter of credit
granted by PNB to MDC to finance the importation of 325 units of M.A.N. diesel bus chassis,
which supposedly include the four units sold by DMC to the private respondent. PNB and
DMC entered a Trust Receipt Agreement after DMC took possession of the units.

UBP, in turn, obtained a Writ of Garnishment as a result of a judgment against DMC. UBP
asserted rights over the promissory notes by virtue of said writ.

The court ruled that SIHI’s claims over the promissory notes were superior to those of PNB
and UBP. It does not appear that UBP questioned the decision of the RTC. PNB, for its part,
appealed to the Court of Appeals. CA reversed the decision of the RTC and declared PNB’s
claims superior to those of SIHI. It held that under Section 9 of the Trust Receipts Law, DMC
was merely an entrustee of the products imported and, thus, obliged to turn over to its
entruster, PNB, the proceeds of the sale of said products. The Court of Appeals denied
SIHI’s motion for reconsideration. Hence, this petition.

ISSUE : Whether or not the goods released under the trust receipt include the vehicles
purchased by the Franco spouses from DMC and for which the promissory notes were
issued?

RULINGS : The evidence for PNB fails to establish that the vehicles sold to the Francos
were among those covered by the trust receipts. As petitioner points out, neither the trust
receipts covering the units imported nor the corresponding bills of lading contain the chassis
and engine numbers of the vehicles in question.
PNB has failed to prove its claim by a preponderance of evidence, the weakness of its
evidence betrayed by the weakness of its arguments. SIHI, for its part, has successfully
discharged its burden. It is undisputed that the subject notes were covered by the Deed of
Sale of receivables executed by DMC in petitioner’s favor. Accordingly, SIHI is entitled to the
promissory notes in question.

PNB asseverates that "the records of the case… is replete with evidence to show that the
subject vehicles are indeed covered by the trust receipts issued by DMC to PNB." However,
it has not pointed out which evidence specifically supports its claim. It does not even explain
why the bills of lading for the imported units do not contain the chassis numbers and serial
numbers of the subject vehicles.

Section 7 of the Trust Receipts Law provides that the entruster shall be entitled to the
proceeds from the sale of the goods released under a trust receipt to the entrustee to
the extent of the amount owing to the entruster or as appears in the trust receipt.

G.R. No. 73271 May 29, 1987

SPOUSES TIRSO I. VINTOLA and LORETO DY VINTOLA, defendants-appellants,

vs.
INSULAR BANK OF ASIA AND AMERICA, plaintiff-appellee.

FACTS : Spouses Vintola (VINTOLAS) applied for and were granted a domestic letter of
credit by the Insular Bank of Asia and America (IBAA). The Letter of Credit authorized the
bank to negotiate for their account drafts drawn by their supplier, one Stalin Tan, on Dax Kin
International for the purchase of puka and olive seashells.

VINTOLAS received from Stalin Tan the puka and olive shells and executed a Trust Receipt
agreement with IBAA. Under that Agreement, the VINTOLAS agreed to hold the goods in
trust for IBAA as the "latter's property with liberty to sell the same for its account, " and "in
case of sale" to turn over the proceeds.

Having defaulted on their obligation, IBAA demanded payment from the VINTOLAS. The
VINTOLAS, who were unable to dispose of the shells, responded by offering to return the
goods. IBAA refused to accept the merchandise, and due to the continued refusal of the
VINTOLAS to make good their undertaking, IBAA charged them with Estafa for having
misappropriated, misapplied and converted for their own personal use and benefit the
aforesaid goods.

The trial court acquitted the VINTOLAS of the offense charged. IBAA commenced a civil
action to recover the value of the goods. The court dismissed the case holding that the
complaint was barred by the judgment of acquittal in the criminal case.

ISSUE : Whether or not acquittal from criminal offense extinguish civil liability?

RULINGS :

A letter of credit-trust receipt arrangement is endowed with its own distinctive features and
characteristics. Under that set-up, a bank extends a loan covered by the Letter of Credit, with
the trust receipt as a security for the loan. In other words, the transaction involves a loan
feature represented by the letter of credit, and a security feature which is in the covering trust
receipt.

A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a

"security interest" in the goods. "It secures an indebtedness and there can be no such thing
as security interest that secures no obligation."

IBAA did not become the real owner of the goods. It was merely the holder of a security title
for the advances it had made to the VINTOLAS The goods the VINTOLAS had purchased
through IBAA financing remain their own property and they hold it at their own risk. The trust
receipt arrangement did not convert the IBAA into an investor; the latter remained a
lender and creditor.

The foregoing premises considered, it follows that the acquittal of the VINTOLAS in the
Estafa case is no bar to the institution of a civil action for collection. It is inaccurate for
the VINTOLAS to claim that the judgment in the estafa case had declared that the facts from
which the civil action might arise, did not exist, for, it will be recalled that the decision of
acquittal expressly declared that "the remedy of the Bank is civil and not criminal in nature."
The VINTOLAS are liable ex contractu for breach of the Letter of Credit — Trust Receipt,
whether they did or they did not "misappropriate, misapply or convert" the merchandise as
charged in the criminal case. Their civil liability does not arise ex delicto, the action for the
recovery of which would have been deemed instituted with the criminal-action (unless waived
or reserved) and where acquittal based on a judicial declaration that the criminal acts
charged do not exist would have extinguished the civil action. Rather, the civil suit instituted
by IBAA is based ex contractu and as such is distinct and independent from any criminal
proceedings and may proceed regardless of the result of the latter.

G.R. No. 90828. September 5, 2000]

MELVIN COLINARES and LORDINO VELOSO, petitioners, vs. HONORABLE COURT

OF APPEALS, and THE PEOPLE OF THE PHILIPPINES, respondents.

FACTS : Petitioners applied for a commercial letter of credit with the Philippine Banking
Corporation (PBC) in favor of CM builders for the purchased of various construction supplies.
PBC approved the letter of credit to cover the full invoice value of the goods and
subsequently signed a prom-forma trust receip0t as security.
PBC wrote a demand letter to petitioner demanding the amount be paid within seven days
but instance of complying they confessed that they can’t pay and requested a grace period
to settle the account. Petitioners proposed to modify the payment of the loan.
Petitioners were charged with estafa. During trial, petitioner Veloso insisted that the
transaction was a “clean loan”. He and petitioner Colinares signed the documents without
reading the fine print, and learning that the trust receipt was merely a formality.
The trial court render a decision convicting the petitioner estafa. The trial court
considered the transaction between PBC and Petitioners as a trust receipt transaction under
Section 4, P.D. No. 115. Petitioners appealed from the judgment to the Court of Appeals and
the CA modified the judgment of the trial court by increasing the penalty.
ISSUE : Whether of not the petitioner were properly charged, tried and convicted for violation
of PD 115 in relation to article 315 of the RPC?
RULINGS : A thorough examination of the facts obtaining in the case at bar reveals that the
transaction intended by the parties was a simple loan, not a trust receipt agreement.
The Trust Receipts Law does not seek to enforce payment of the loan, rather it
punishes the dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the owner. Here, it is crystal clear that
on the part of Petitioners there was neither dishonesty nor abuse of confidence in the
handling of money to the prejudice of PBC. Petitioners continually endeavored to meet their
obligations, as shown by several receipts issued by PBC acknowledging payment of the
loan.
There are two possible situations in a trust receipt transaction. The first is covered by
the provision which refers to money received under the obligation involving the duty to
deliver it (entregarla) to the owner of the merchandise sold. The second is covered by the
provision which refers to merchandise received under the obligation to “return” it (devolvera)
to the owner.
Failure of the entrustee to turn over the proceeds of the sale of the goods, covered by
the trust receipt to the entruster or to return said goods if they were not disposed of in
accordance with the terms of the trust receipt shall be punishable as estafa under Article 315
(1) of the Revised Penal Code, without need of proving intent to defraud.
Petitioners received the merchandise from CM Builders Centre on 30 October 1979. On
that day, ownership over the merchandise was already transferred to Petitioners who were to
use the materials for their construction project. It was only a day later, 31 October 1979, that
they went to the bank to apply for a loan to pay for the merchandise.
This situation belies what normally obtains in a pure trust receipt transaction
where goods are owned by the bank and only released to the importer in trust
subsequent to the grant of the loan. The bank acquires a “security interest” in the goods
as holder of a security title for the advances it had made to the entrustee. The ownership of
the merchandise continues to be vested in the person who had advanced payment until he
has been paid in full, or if the merchandise has already been sold, the proceeds of the sale
should be turned over to him by the importer or by his representative or successor in interest.
To secure that the bank shall be paid, it takes full title to the goods at the very beginning and
continues to hold that title as his indispensable security until the goods are sold and the
vendee is called upon to pay for them; hence, the importer has never owned the goods and
is not able to deliver possession. In a certain manner, trust receipts partake of the nature of a
conditional sale where the importer becomes absolute owner of the imported merchandise
as soon as he has paid its price.